A Tale of Two Shale States

July 28, 2011

Politicians wringing their hands over how to create more jobs might study the shale boom along the New York and Pennsylvania border. It's a case study in one state embracing economic opportunity, while the other has let environmental politics trump development, says the Wall Street Journal.

The Marcellus shale formation offers one of the biggest natural gas opportunities. Former Pennsylvania Governor Ed Rendell recognized that potential and set up a regulatory framework to encourage and monitor natural gas drilling.

More than 2,000 wells have been drilled in the Keystone State since 2008, and gas production surged to 81 billion cubic feet in 2009 from five billion in 2007.

A new Manhattan Institute report by Timothy Considine estimates that a typical Marcellus well generates some $2.8 million in direct economic benefits from natural gas company purchases; $1.2 million in indirect benefits from companies engaged along the supply chain; another $1.5 million from workers spending their wages, or landowners spending their royalty payments; plus $2 million in federal, state and local taxes.

The state Department of Labor and Industry reports that Marcellus drilling has created 72,000 jobs between the fourth quarter of 2009 and the first quarter of 2011.

Then there's New York.

The state holds as much as 20 percent of the estimated Marcellus shale reserves, but green activists have raised fears about the drilling technique known as hydraulic fracturing and convinced politicians to enact what is effectively a moratorium.

The Manhattan Institute study shows that a quick end to the moratorium would generate more than $11.4 billion in economic output from 2011 to 2020, 15,000 to 18,000 new jobs, and $1.4 billion in new state and local tax revenue.

Governor Andrew Cuomo has said he wants to lift New York's moratorium, and the state's recently released draft rules are a step forward. But they must still undergo legal review and a public comment period that could bar New York drilling for the rest of this year, if not longer.